Ronald’s Pizza produces and sells the secret recipe pizzas. Each pizza sells for RM20.00. During December, Ronald’s sold 25,000 pizzas (the average amount sold each month). The restaurant employs cooks, servers and one supervisor (the owner, Black). All cooks and servers are part time employees. Ronald’s maintain a pool of part time employees so that the number of employees scheduled can be adjusted to the changes in demand. Demand varies on a weekly as well as a monthly basis. A Janitor is hired to clean the building on a weekly basis. The building is leased from a local real estate company. The building has no seating capabilities. All orders are filled on a drive-through basis. The supervisor schedules work, opens the building, counts the cash, advertises, and responsible for hiring and firing. The following costs were incurred during December. Cost Amount Cost Amount Flour 2,500 Utilities 1,500 Meat 950 Depreciation: Seafood 500 Cooking equipment 300 Vegetables 900 Cash register 80 Cheeses 1,000 Advertising 500 Tomato Sauces 1,500 Janitor's wages 800 Other ingredients 180 Janitorial supplies 200 Cooks' wages 2,500 Servers' wages 900 Supervisors' salary 2,000 Rent 1,800 Required 1) Calculate: (1) Prime cost, (2) Conversion, (3) Production cost and (4) Period cost. 2) Prepare an income statement based on absorption-costing method income for the month of December.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Ronald’s Pizza produces and sells the secret recipe pizzas. Each pizza sells for RM20.00. During December, Ronald’s sold 25,000 pizzas (the average amount sold each month). The restaurant employs cooks, servers and one supervisor (the owner, Black). All cooks and servers are part time employees. Ronald’s maintain a pool of part time employees so that the number of employees scheduled can be adjusted to the changes in demand. Demand varies on a weekly as well as a monthly basis.

A Janitor is hired to clean the building on a weekly basis. The building is leased from a local real estate company. The building has no seating capabilities. All orders are filled on a drive-through basis.

The supervisor schedules work, opens the building, counts the cash, advertises, and responsible for hiring and firing. The following costs were incurred during December.

Cost	Amount	Cost	Amount
Flour	2,500	Utilities	1,500
Meat	950	Depreciation:
Seafood	500	Cooking equipment	300
Vegetables	900	Cash register	80
Cheeses	1,000	Advertising	500
Tomato Sauces	1,500	Janitor's wages	800
Other ingredients	180	Janitorial supplies	200
Cooks' wages	2,500	Servers' wages	900
Supervisors' salary	2,000	Rent	1,800

Required

1) Calculate: (1) Prime cost, (2) Conversion, (3) Production cost and (4) Period cost.

2) Prepare an income statement based on absorption-costing method income for the month of December.

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